Motor Mouth: Tesla’s real business model needs a reality check

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Tesla's 'profits' are totally dependent on ZEV credits that might disappear if Trump gets re-elected. Via: drivingdotca

Thanks to Elon Musk, I spent all last week answering two seemingly simple questions. Just two: could Tesla produce the 20 million cars Mr.

RELATED Motor Mouth: Are provincial ZEV mandates threatening Canadian jobs? Motor Mouth: Making sense of the EPA’s threat to fuel economy standards Or, and this is where California’s ZEV program turns into the worst kind of market-distorting boondoggle, you can buy a credit from Tesla. Now the good news for anyone shopping credits — that should be read everyone other than Tesla — is that Mr. Musk will charge you a lot less than US$5,000 for one of its credits.

But wait, it gets even better. A GM or a Toyota — yes, even greener-than-thou Toyota bought 88,000 California credits from Tesla in 2017 and 2018, says Current Automotive — might be paying Tesla just US$1,500 per credit, but Tesla gets four credits per car it produces. Yes, Mr. Musk gets his competitors to fund each and every one of his cars to the tune of six or seven grand per, Forbes, again, putting the figure at US$6,250 in 2017.

The problem for Tesla — and why I’m only discussing these market distortions now — is that, depending on the result of America’s November 3 election, those ZEV credits just might disappear. Donald Trump, love or hate him, has not made any bones about wanting to revoke California’s right to set its own emissions standards. And as vociferously as California is in defending its right to control its own environment, its special status is not set in stone.

 

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